How Do You Succeed In The Entertainment Business? Basic Economics

You learned everything you need to know about success in the entertainment industry the first two weeks of your junior year in high school.

About 7 months ago, I wrote a blog post about how to capitalize on emerging opportunities in the entertainment industry.  It turned out to be one of my more popular posts, and as I sit here 7 months later, I think I stand by everything I said.  Things are going about like we expected they would.

Based on that temporary success, I thought I would revisit the topic from another perspective.  I gave it a lot of thought (about 10 minutes or so) and I think success in today's media business is simply a function of  basic economics.

I am not an economist, but from what I can tell, there is one essential rule in economics from which everything else springs -- supply and demand.  The value of anything moves roughly in sync with demand for that item, and roughly inverse to the supply.

Here's one example: In the media business, the Internet provides an infinite number of channels to distribute information.  Therefore, owning a website has virtually no value by itself.  Everyone has a website.  But having a website that is one of very few channels to highly desired content is very valuable.  High demand + limited supply = high value.

In specific terms, look at the daily news.  You can't copyright the news.  Anyone who wants to report a story can report it.  There are essentially an infinite number of places to get news, and therefore it has little value.  Studies confirm that most consumers are not interested in paying for online news.

Mobile data provides an example of the other side of the coin.  As millions of iPads and smartphones are being sold, there is a massive increase in demand for mobile content.  A lot of us use free WiFi (like at Starbucks, where I'm sitting right now as I write this on my laptop) to get content.  But the mobility of the new devices has greatly increased the demand for anytime, anywhere access -- today, that means access to a cellular system.

In most markets, there are only one or two cellular networks.  That means the demand for access to those networks is rapidly increasing and the supply is limited.  Consequently, Verizon and AT&T have stopped offering programs with unlimited volume and they are charging for every kilobyte of data that runs through their systems.  And as people download or stream loads of HD content on to their iPads, there are a whole lot of kilobytes moving through the air.

So what's the right strategy?  None of us have the money or proper licenses to build a cellular network.  How do we get in a business that takes advantage of Economics 101?  The answer is to do something special and attractive.

All of us have the ability to create an endless amount of content -- but all content is not the same.  Strive to do something that's truly unique.   That handles the supply side of the equation -- the essence of true creativity is that it inherently limits the supply of what is created.  

On the other side, make sure you create something that will attract an audience.  Understand who you are creating for and what they really like.  If you can do that, then there will be a demand for what you create.  The higher the demand, the more valuable the product.

That's it -- it is truly that simple.  Perhaps so simple that you're questioning the value of the advice.  Is it worth stating the obvious?  I think it is.  Some of us get so caught up in trying to create intricate get-rich schemes, that we lose sight of the obvious.  Just find an audience and give them what they want in a unique way.  That's your best path to success.

Now, if you want to talk about financing films with a combination of two-tiered equity, mezzanine lenders and tax credits, that's a little more complicated.  Maybe we'll tackle that one next time....or not.